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We are all aware of the major curve balls that were announced in George Osborne’s Post-Election budget this summer. One of the biggest losers from the announcements are buy-to-let property investors who could potentially see their tax bill more than double.

The major issue that has emerged from the announcements is that the landlords’ ability to deduct the cost of their mortgage interest from their rental income when calculating their tax has been removed. The wealthiest investors, who do not have any mortgages, are unaffected.

The change is due to be introduced in 2017 and fully implemented by 2020. The new rules will wipe out any profits for landlords with mortgage interest being 75% or more of their rental income, net of other expenses. Those paying additional-rate taxes will see their returns on investment disappear once mortgage costs reach 68% of rental income.

Looking into the future, it will become very difficult for middle-income borrowers to get into the buy to let market and those that have just entered the buy to let scheme face some issues in the next couple of years.

One solution for buy to let landlords might be to operate their business via a limited company. However, this option won’t be beneficial for all investors, individuals will need to take advice to determine which structure will be most appropriate for them.

If you are worried about the tax changes and if you would like any advice on what to do next, please contact Jonathan Cunningham at jonathan.cunningham@pmm.co.uk or call 01254 679131.